Question 1

In a long-run equilibrium where firms have identical costs, it is possible that some firms in a competitive market are making a positive economic profit.

Accepted Answer

A) True 
 B)False

Question 2

If a competitive firm is operating at its efficient scale, then is the firm's profit positive, zero, or negative?

Accepted Answer

Profit is zero for a

Question 3

A profit-maximizing competitive firm is earning a profit of $24,000. Its marginal cost is $17 and its average total cost is $13. How many units of output is the firm producing and selling?

Accepted Answer

Profit = (

Question 4

When it produces and sells 80 units of output, a competitive firm's average total cost is $25 and its profit is $480. What is the firm's total revenue if it sells 85 units of output?

Accepted Answer

At Q = 80, profit is

Question 5

A key characteristic of a competitive market is that

Accepted Answer

A) government antitrust laws regulate competition. 
B) producers sell nearly identical products. 
C) firms minimize total costs. 
D) firms have price setting power. 
A) government antitrust laws regulate competition. 
B) producers sell nearly identical products. 
C) firms minimize total costs. 
D) firms have price setting power.

Question 6

In the long run, when price is less than average total cost for all possible levels of production, a firm in a competitive market will choose to exit (or not enter) the market.

Accepted Answer

A) True 
 B)False

Question 7

​Whenever firms in a perfectly competitive market produce the output level where marginal revenue equals marginal cost, we know that the firm is earning an economic profit.

Accepted Answer

A) True 
 B)False

Question 8

Give two reasons why the long-run industry supply curve may slope upward. Use an example to demonstrate your reasons.

Accepted Answer

1) Some resource used in production may

Question 9

When some resources used in production are only available in limited quantities, it is likely that the long-run supply curve in a competitive market is

Accepted Answer

A) downward sloping. 
B) upward sloping. 
C) horizontal. 
D) vertical. 
A) downward sloping. 
B) upward sloping. 
C) horizontal. 
D) vertical.

Question 10

Firms operating in perfectly competitive markets produce an output level where marginal revenue equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 11

A profit-maximizing firm in a competitive market will earn zero accounting profits in the long run.

Accepted Answer

A) True 
 B)False

Question 12

When a certain competitive firm produces and sells 40 units of output, its total revenue is $740. If there is no change in price, then what is the amount of the firm's total revenue if it produces and sells 45 units of output?

Accepted Answer

At 45 units of outpu

Question 13

​A restaurant, which operates in a perfectly competitive market, is evaluating whether it should serve breakfast on a daily basis. It would choose to do this when its revenues cover its variable costs.

Accepted Answer

A) True 
 B)False

Question 14

If Buddy's Build A Bear Shop sells its product in a competitive market, then

Accepted Answer

A) the price of that product depends on the quantity of the product that Buddy's Build A Bear Shop produces and sells because the firm's demand curve is downward sloping. 
B) Buddy's Build A Bear Shop total cost must be a constant multiple of its quantity of output. 
C) Buddy's Build A Bear Shop total revenue must be proportional to its quantity of output. 
D) Buddy's Build A Bear Shop total revenue must be equal to its average revenue. 
A) the price of that product depends on the quantity of the product that Buddy's Build A Bear Shop produces and sells because the firm's demand curve is downward sloping. 
B) Buddy's Build A Bear Shop total cost must be a constant multiple of its quantity of output. 
C) Buddy's Build A Bear Shop total revenue must be proportional to its quantity of output. 
D) Buddy's Build A Bear Shop total revenue must be equal to its average revenue.

Question 15

Use a graph to demonstrate the circumstances that would prevail in a competitive market where firms are earning economic profits. Can this scenario be maintained in the long run? Explain your answer.

Accepted Answer

In a competitive market where firms are

Question 16

Table 14-3
The table represents a demand curve faced by a firm in a competitive market.
​
 $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Quantity Demanded } \
\text { (Units) }
\end{array} & \begin{array} { c } 
\text { Total Revenue } \
\text { (Dollars) }
\end{array} \
\hline 13 & 91 \
\hline 15 & 105 \
\hline 17 & 119 \
\hline 19 & 133 \
\hline 21 & 147 \
\hline
\end{array}$$
-Refer to Table 14-3. For this firm, the average revenue when 17 units are produced and sold is

Accepted Answer

A) $2. 
B) $7. 
C) $1. 
D) $0. 
A) $2. 
B) $7. 
C) $1. 
D) $0.

Question 17

Table 14-1
​
​
 $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Price } \
\text { (Dollars per unit) }
\end{array} & \begin{array} { c } 
\text { Quantity Demanded } \
\text { (Units) }
\end{array} \
\hline 5 & 0 \
\hline 5 & 2 \
\hline 5 & 4 \
\hline 5 & 6 \
\hline 5 & 8 \
\hline 5 & 10 \
\hline 5 & 12 \
\hline 5 & 14 \
\hline 5 & 16 \
\hline 5 & 18 \
\hline
\end{array}$$
-Refer to Table 14-1. Over which range of output is average revenue equal to price?

Accepted Answer

A) 2 to 10 units 
B) 6 to 14 units 
C) 10 to 18 units 
D) Average revenue is equal to price over the entire range of output. 
A) 2 to 10 units 
B) 6 to 14 units 
C) 10 to 18 units 
D) Average revenue is equal to price over the entire range of output.

Question 18

Scenario 14-2
The information below applies to a competitive firm that sells its output for $45 per unit.
• When the firm produces and sells 120 units of output, its average total cost is $23.5.
• When the firm produces and sells 121 units of output, its average total cost is $23.65.
-Refer to Scenario 14-2. Suppose the firm is producing 120 units of output and its fixed cost is $950. Then its variable cost amounts to

Accepted Answer

A) $9,360.25. 
B) $7,500.00. 
C) $2,820.00. 
D) $1,870.00. 
A) $9,360.25. 
B) $7,500.00. 
C) $2,820.00. 
D) $1,870.00.

Question 19

By comparing the marginal revenue and marginal cost from each unit produced, a firm in a competitive market can determine the profit-maximizing level of production.

Accepted Answer

A) True 
 B)False

Question 20

Figure 14-1
Suppose that a firm in a competitive market has the following cost curves:   ​
-Refer to Figure 14-1. If the market price is $5, the firm will earn

Accepted Answer

A) positive economic profits in the short run. 
B) negative economic profits in the short run but remain in business. 
C) negative economic profits and shut down. 
D) zero economic profits in the short run. 
A) positive economic profits in the short run. 
B) negative economic profits in the short run but remain in business. 
C) negative economic profits and shut down. 
D) zero economic profits in the short run.

Exam 14: Firms in Competitive Markets

In a long-run equilibrium where firms have identical costs, it is possible that some firms in a competitive market are making a positive economic profit.

If a competitive firm is operating at its efficient scale, then is the firm's profit positive, zero, or negative?

A profit-maximizing competitive firm is earning a profit of $24,000. Its marginal cost is $17 and its average total cost is $13. How many units of output is the firm producing and selling?

When it produces and sells 80 units of output, a competitive firm's average total cost is $25 and its profit is $480. What is the firm's total revenue if it sells 85 units of output?

A key characteristic of a competitive market is that

In the long run, when price is less than average total cost for all possible levels of production, a firm in a competitive market will choose to exit (or not enter) the market.

​Whenever firms in a perfectly competitive market produce the output level where marginal revenue equals marginal cost, we know that the firm is earning an economic profit.

Give two reasons why the long-run industry supply curve may slope upward. Use an example to demonstrate your reasons.

When some resources used in production are only available in limited quantities, it is likely that the long-run supply curve in a competitive market is

Firms operating in perfectly competitive markets produce an output level where marginal revenue equals marginal cost.

A profit-maximizing firm in a competitive market will earn zero accounting profits in the long run.

When a certain competitive firm produces and sells 40 units of output, its total revenue is $740. If there is no change in price, then what is the amount of the firm's total revenue if it produces and sells 45 units of output?

​A restaurant, which operates in a perfectly competitive market, is evaluating whether it should serve breakfast on a daily basis. It would choose to do this when its revenues cover its variable costs.

If Buddy's Build A Bear Shop sells its product in a competitive market, then

Use a graph to demonstrate the circumstances that would prevail in a competitive market where firms are earning economic profits. Can this scenario be maintained in the long run? Explain your answer.

Table 14-3 The table represents a demand curve faced by a firm in a competitive market. ​ Quantity Demanded (Units) Total Revenue (Dollars) 13 91 15 105 17 119 19 133 21 147 -Refer to Table 14-3. For this firm, the average revenue when 17 units are produced and sold is

Table 14-1 ​ ​ Price (Dollars per unit) Quantity Demanded (Units) 5 0 5 2 5 4 5 6 5 8 5 10 5 12 5 14 5 16 5 18 -Refer to Table 14-1. Over which range of output is average revenue equal to price?

By comparing the marginal revenue and marginal cost from each unit produced, a firm in a competitive market can determine the profit-maximizing level of production.

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: ​ -Refer to Figure 14-1. If the market price is $5, the firm will earn

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Applications: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

Whenever firms in a perfectly competitive market produce the output level where marginal revenue equals marginal cost, we know that the firm is earning an economic profit.

A restaurant, which operates in a perfectly competitive market, is evaluating whether it should serve breakfast on a daily basis. It would choose to do this when its revenues cover its variable costs.

Table 14-3 The table represents a demand curve faced by a firm in a competitive market. Quantity Demanded (Units) Total Revenue (Dollars) 13 91 15 105 17 119 19 133 21 147 -Refer to Table 14-3. For this firm, the average revenue when 17 units are produced and sold is

Table 14-1 Price (Dollars per unit) Quantity Demanded (Units) 5 0 5 2 5 4 5 6 5 8 5 10 5 12 5 14 5 16 5 18 -Refer to Table 14-1. Over which range of output is average revenue equal to price?

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1. If the market price is $5, the firm will earn